Wednesday, April 18, 2012

Men who can both be right and sit tight are uncommon. I found it one of the hardest things to learn. But it is only after a stock operator has firmly grasped this that he can make big money. - Jesse Livermore

I don't have time produce some of my own work, so I wanted to highlight Eric King's interview with Rick Rule at King World News:

You know, Eric, for investors who are frustrated, past is probably prologue. They need to have a sense of what happened in the 1970s market. If you go back to that bull market, you will remember there were numerous occasions, probably 25 or 30 in that decade, where the precious metals prices fell 10% or 15%. The equities associated with gold and silver fell even further.

The grandaddy of all of those declines was in 1975. Now, what’s instructive to know is that nothing changed with regards to the fundamentals for gold and silver. What changed was the official sector’s interest rates and people’s perceptions of the value of gold and silver.

If you were in the market and had the cash and the courage to stay in the market from peak to trough, that is from the bottom of 1975 decline, five years later you were up eight-fold. It’s tragic that some people had the idea behind the bull market, but didn’t have the cash or the courage to stay the trade. Can you imagine getting shaken out of a trade where you were right, and then missing five years of an eight-fold advance?So, for people who are frustrated with the volatility in this market, especially the downside volatility, simply remember that what is changing are people’s attitudes, not the fundamentals. The market doesn’t care if you are frustrated. The market doesn’t care about your time frame.

The market doesn’t care about anything. The market is merely a facility for buying and selling assets. If you have the courage of your convictions, if you believe, as an example, that gold is a better store of wealth than fiat currencies, then stay the trade.

Not much to add to that other than that I have found in that in twenty years of trading, which encompassed being an institutional junk bond trader/market maker, a trader of my own capital and the manager/trader of a small hedge fund, the worst time to bail out of a trade that I know is right is when I feel the most uncomfortable holding it. Right now the sentiment in the metals and mining sector is about as putrid as I've observed it for close to eleven years of doing this sector exclusively.

I can say with complete conviction and confidence that the best gains in this sector are still ahead of us.

19 comments:

Dave; you are so correct. This is made more difficult because "we" were never mainstream on this anyway.

Bottom line: if you think most if not all the econ problems will be solved soon without continued piling up of debts, if you believe the banking crisis (with the mark to bullshit accounting)has been fixed, if you think the US can attract manufacturing and services back to our shores and still be competitive, if you believe there is no supply demand issues with PM,

then there is no need to own PM--unless there is the outside chance your beliefs are wrong and we have problems beyond belief.

Checking the mental status: I think gold and silver are still up on the year--silver 12%? Gold up ~ 4.7%, SPX 10.3%. HUI admittedly has been tossed around like an orphan.

I don't disagree with anything you've said...support it in fact. However at no time in our history have we had the MASSIVE intervention to control what TPTB's good hand (fiat and paper) and bad hand (any hard assets)are perceived as. They have control of virtually everything now.....the capper being JPM's controlled yield in the credit markets. That is control in it's finest form. Leads me to believe that if anything should ever "happen" the Fed will just come in and print massively and/or declare force majeure and once again the consequences of this roller-coaster will thus only be felt by people like you and I. The markets will only correct unless the very people who control them are positioned for it ALA 2008. That happens when they want something.....

Actually MS, if you use the yardstick of history, market intervention/manipulation fails badly over long periods of time. This one will fail very badly. My only fear is that it will start WW3 when someone like the Chinese calls the Fed on proving up the gold supposedly safekept on behalf of the Treasury/People Of The United States.

Agree it always fails but my point is that we've never seen it on this scale and yet if you told me 4 years ago what we are looking at now (too numerous to even begin to list) would you have the markets at these levels? I certainly wouldn't. Goes back to my comment of about a week ago stating that it already failed...they just don't allow the actual consequences of it. That is where it really is different this time around.....and not in the pump and spin way that phrase is tossed around. The history of capitalism has always had winners and losers....it's the very equation that allowed our country to become what it has. We don't have that any longer simply because the consequences are not allowed at the top level.

Size and scale just mean that the counter-effect snap-back will be equally as massive. That's why I fear war as the counter-effect more than I relish in the dreams of $30k gold/$2k silver and GG at $18,000/share.

Right now, the massive money printing and intervention is serving its purpose. Eventually the law of diminishing marginal returns will invade the money being printed and it won't work. It already takes a lot more money/debt at the margin to create the intended effect. At some point the rest of the world will not accept dollars under any circumstances except threat of war. That threat worked against Iraq and Libya, so far Iran is saying "fuck you"

Soon the AAPL cash flow will be ours. Patience. We have not even touched a "mania" phase (third phase) of this bull yet and with the "developments" (surprise surprise,) in Spain and Italy maybe we can renew phase 2 of the bull shortly. Phase 3 will be great.

He's referring to all the institutional/hedge fund money that is being throw into AAPL stock. He's just referencing the fact that the final "blow off" stage - like what happened in internet stocks and homes recently - is yet to come.

The answer is obvious. The IMF is not setup to help countries or taxpayers, it was created to rob countries, rob taxpayers, and generally wreak havoc in times of trouble just so the wealthy class can be bailed out again, and again, and again, whenever the banks and bondholders get in trouble by taking on excessive risk.

Boy, someone must get paid by the pages they write. I skimmed the bill and just the table of contents would put you to sleep...probably their intent. There appear to be two sections of interest: Section 32301 pertains to commerical vehicles in which the "Electronic On-Board Recording Device" will track GPS location and hours driven/day. The stated purpose is to prevent accidents from too many hours on the road for commercial vehicles. I guess I can see the intended purpose, but it certainly implies Big Brother is watching. The second section of interest: Section 32710 pertains to private (motorcoach) vehicles and it is much less vague on the intented usage...hmmmm

Jim Willie: “In 2 Year’s Time, the Gold Cartel WILL HAVE NO PHYSICAL GOLD”

Starting out with the global markets overall, Jim indicated we are currently in a “false calm.” He said, “We have not gotten past the aftermath of MF Global, the distrust of COMEX is enormous, a lot of companies are just not permitted to use COMEX anymore…We’ve had a few naked short raids of the gold market, and I think they go hand in hand with some of the gigantic dollar swap exercises that have—I believe—dumped at least $2 trillion dollars into the system in the last several weeks alone. We’re on the verge of Europe fracturing Tekoa. I think it’s happening right in front of our eyes.” Here’s the interview:

Mankind has a long history of participating in bubbles. In past times, people exchanged fortunes for simple tulip bulbs. In another, they exchanged cash for stock in Louisiana swampland. In our own time, from the early ‘70s until the late 2000’s, people held the belief that real estate was a one way asset and bought on extreme leverage.

The biggest bubble in human history is in sovereign debt, the obligations of governments around the world. The classic signs of a bubble are present. Despite the fact that virtually all governments are insolvent (the Reality), there exists an almost universal belief that sovereign debt is safe (the Perception). There is a massive gap between reality and perception.

What we hear is that gold, silver and oil are in bubble mania. Nothing could be further from the truth. The perception is so far below the reality that we effectively have a negative bubble. Buyers of these three assets are speculating fools according to the mainstream media. The only thing that is foolish is not holding onto positions and not adding as nominal prices periodically come down.

In an audio interview with Metallwoche, Egon von Greyerz talks about theoptions of either a deflationary implosion of the financial system or unlimitedmoney printing leading to hyperinflation and the importance of gold for bothscenarios. Egon von Greyerz on Metallwoche: Keep your Gold outside the bankingsystem!

You may view the full post athttp://goldswitzerland.com/index.php/evg-keep-your-gold-outside-the-banking-system/

BAC and MS had “great” earnings. MS no longer includes DVA in its “continuing operations” headline number. It was a loss of $2 billion this quarter. With 2 billion shares outstanding, that would have wiped out the gain. What bothers me, is that in Q3, when it was a gain of $3 billion, it was part of continuing ops. Really? It is that easy to change what is part of ongoing business and what isn’t. During this quarter they allegedly made $600 million from unwinding a trade with Italy. They were taking credit reserves against this trade, and were able to release it. Fair, but it should be categorized the same as DVA. This DVA categorization shift seems incredibly misleading and is the exact sort of thing I thought Sarbanes-Oxley was supposed to protect investors from. The quarter was okay, but this shift strikes me as very untrustworthy. On BAC, there is a $3.3 billion adjustment to Fair Value Obligations. Fair enough, but what are the obligations, and what is the adjustment? It seems that something that is size of the quarter’s earnings should be disclosed more fully. I would like to know what it is, and it has to be hedge that tightened, because nothing much went materially wider this quarter. On other hand, the new issue bond side must have killed it, great quarter for bond issuance, is that sustainable?

Brink’s reported a massive 3.1 million ounce silver withdrawal from the customer inventory Tuesday, and our friends at JPMorgan reported a deposit of 720,000 ounces.The farce continues:JP Morgan again made a mockery of the COMEX physical inventory update by reporting Tuesday’s deposit of exactly 720,000.000 ounces. The statistical likelihood of 720 one-thousand ounce bars adding up to exactly 720k ounces…to 3 decimal places is roughly the same as the likelihood of the sun rising in the Western sky on 4/19.This means the ‘deposit’ reported by JP Morgan is merely a paper shuffling of ‘silver’ inventory around as the cartel is now desperate to keep the charade going a little longer.

Eric Arthur Blair aka George Orwell

"Hope" is not a valid investment strategy

Full Time Jobs Over Last 5 Years

Is Your Gold Missing?

Why Gold?

Gold is the world's oldest currency. You exchange your fiat currency (dollars, euros, yen, yuan) into gold as an insurance policy against catastrophic Central Bank and Government policies which serve to destroy the value of fiat currencies and destroy democracy.

Gold can ONLY be considered an investment to the extent that it remains significantly and historically undervalued in relation to the fiat currencies against which its value is measured. Otherwise it remains the world's oldest currency and is completely free from the counterparty risk associated with currency by Government fiat (i.e. fiat currencies rely on a Government's "full faith and credit.")

Epic Quote - "Jesse" Sent This To Me

"The world will soon wake up to the reality that everyone is broke and can collect nothing from the bankrupt, who are owed unlimited amounts by the insolvent, who are attempting to make late payments on a bank holiday in the wrong country, with an unacceptable currency, against defaulted collateral, of which nobody is sure who holds title." - Anonymous

The Basic Fundamental Problem

What's the solution?

“THERE IS NO MEANS OF AVOIDING THE FINAL COLLAPSE OF A BOOM BROUGHT ABOUT BY CREDIT EXPANSION. THE ALTERNATIVE IS ONLY WHETHER THE CRISIS SHOULD COME SOONER AS THE RESULT OF A VOLUNTARY ABANDONMENT OF FURTHER CREDIT EXPANSION OR LATER AS A FINAL AND TOTAL CATASTROPHE OF THE CURRENCY SYSTEM INVOLVED.”

Ludwig von Mises – Austrian Economist (1881- 1973)

Quote Of The Month Courtesy of "Jesse"

Unfortunately for Larry Summers, Ben Bernanke, and their friends at the BIS, they have not yet figured out how to print physical gold, silver, and other essential commodities, and the world is reaching the point where it might simply start ignoring the New York based markets with respect to essential commodities such as basic materials, oil, foodstuffs, and the like, as they become increasingly irrelevant, fraudulent, and Orwellian. And then where will the financial engineers be, except with no more excuses and no place to hide?

Great Quote From Jim Rogers On Govt CPI Reporting

JR: I mean, we have inflation now. If you go to the shop, whether it’s groceries, or education or insurance or health care, prices are going up for everything. The government lies about it in the US. Some countries lie, many countries don’t: Australia, China, India and Norway. Many countries don’t lie about it and acknowledge that we have inflation. Others lie about it, the UK and the US, but if you go shopping you know prices are up.

Q: Are you saying that the American Consumer Price Index (CPI) published by the US Bureau of Labor Statistics is a lie? JR: In my opinion, yes, of course it is. Have you looked at it? They’ve changed their accounting several times in the past few decades. When housing was 20% to 25% of the CPI and housing was going up, they didn’t count it, saying rents weren’t going up, and then when home prices started going down, they counted it. It’s the same with many things. It’s staggering some of the tortuous reasoning that the BLS has used over the past 25 or 30 years. When the price of gasoline goes up, they say it’s not really going up because it’s better gasoline, better quality, therefore you’re getting more for your money. I mean, it’s endless, the stuff that they say and for some reason people sit there, although more and more people are catching on, and accept what the government says.

Priceless Quote From Richard Russell

On Larry Summers: This doofus practically ruined Harvard when he headed it. I can't think of a worse choice to be chief economic advisor. I wouldn't trust Summers to manage a Starbucks franchise.

Quote of the Week

"The primary function of a Central Bank is to engage in the massive transfer of wealth from the middle class to the wealthy elite. The Federal Reserve was set up to do this with the blessing and support of Congress." - Dave in Denver

If you refuse to believe the above, please read "The Creature From Jekyll Island: A Second Look at the Federal Reserve" by G. Edward Griffin and then explain to me why the Senate voted down the Vitter Amendment and Congress refuses to pass a law requiring a full audit of the Fed, even though the Fed is using taxpayer-backed money to bailout Wall Street and Europe.

Quote of the Month

And very relevant in the context of yesterday's post about gold moving higher against all fiat currencies:

Just imagine what would happen if a mere ten percent of the money currently going into bonds were instead to go into gold. As in 1972, the real move has yet to begin.

- Murray Pollit, Pollit & Co.

A Picture Says It All...

www.moneyandmarkets.com

Golden ore samples produced by Eurasian Minerals

Undisclosed exploration site

The Next Reserve Currency?

1 oz. Chinese Panda

Guess who said this?

Rising prices of precious metals and other commodities are an indication of a very early stage of an endeavor to move away from paper currencies...What is fascinating is the extent to which gold still holds reign over the financial system as the ultimate source of payment.

-Alan Greenspan, 9 Sep 2009

THIS is what REAL money looks like

1 oz. Gold Eagles

Alan Greenspan said what?

“Deficit spending is simply a scheme for the ‘hidden’ confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights.”

From "Gold and Economic Freedom" a 1966 Essay by Alan Greenspan

About Me

I spent many years working in various analytic jobs and trading on Wall Street. For nine of those years, I traded junk bonds for a large bank. I have an MBA from the University of Chicago, with a concentration in accounting and finance.
Currently I co-manage a precious metals and mining stock investment fund in Denver.
My goal is to help people understand and analyze what is really going on in our financial system and economy.